tv Street Signs CNBC August 21, 2012 2:00pm-3:00pm EDT
quick and haven't seen them in a few days, a new experience. >> sue, that basically brings us to the end of "power lunch"? >> it does indeed. have a great afternoon. "street signs" begins right now. ♪ >> it is always a smooth ride here on "street signs." unlike america's air force, this hour, delays -- america's airports, delays and seats made for garden hoses. and why are some awful? apple versus microsoft, the big fruit bruised a bit after a rare down grade but it still wears the biggest company crown. which was the better investment over its run to the record? you'll be surprised. if all that rock'n roll in your ipod is hurting your hearing, we
will go to the latest fashion craze and stock you may need to dump right now. mandy. >> a new year multi-year high looked like a sure thing. not now. the dow has to finish at its highest close since 2007. the s&p 500 did hit the highest intraday levels since may 2008. it would have to finish at 1419 for the highest close. as for inside, the composite has not hit any new highs today but the nasdaq 100 did hit its highest intraday levels, do you the math, 12 years ago. apple has mirrored the markets. touched another all time high this morning but after oracle investment research downgraded the stock, believe it or not, to hold from buy. >> despite the stock being lower today, apple does remain the world's biggest company ever
eclipsing microsoft's market cap record set in 1999 at least in terms of nol nal dollaminal dol. since microsoft hit that record, it's been a -- how do they avoid that fate? we bring in two experts. first to you, apple got a down grade today i had been told was illegal. what is your take on the down grade? >> somebody's trying to make some noise today and get their name out there. nothing to do with the future of apple. somebody is using this as promotional event versus stock cal call. >> okay. let's go through it. talk about apple tv. some people say this is not going to happen. an article recently maybe they weren't going to do anything from an actual tv privilege. so if they don't, is that a reason apple stock would fall?
>> no. we've done a lot of research on it and been to asia and talked to people on the tv. let's say we're wrong. the investors i've talked to are keenly aware of this and want an apple tv in their home and not making investment decisions based on this. it's a small impact and add 5% to the calendar 14 numbers. that's gravy on top of this. the real key commenes down what this down grade misses how explosive the device in smartphones and tablets will have over the next decade. >> i want to get to you, you said the biggest threat is not android, but complacency. >> it's going on. apple's been so innovative and the secret to its success, it must continue to do that. i think that's the problem
microsoft has. >> why do you think they can't do that? >> they have done it. they had big contracts, one sale, lots of consumers. apple is a consumer company, sell one at a time. as long as they continue to innovate and execute, the sky is the limit. >> is the samsung lawsuit a threat to apple? >> it's probably not. i'm not a patent attorney and we can't see it until we see the charges. it will go back and forth. samsung as a competitor very legitimate. i'm of the camp android is a threat. we get back to the growth of tablets, the biggest threat to ios is android. i don't know the lawsuits are of particular interest in the next year or two. >> if they do tv like you said they will, what will be the final frontier? what's left after that? >> they will reinvent it again.
everyone will have a computer with them in their pocket. they will reinvent that device. as you look beyond the tv and 0 2015 and beyond, you will start to see the way we use these devices is different. could be something we haven't thought of and something in your ear and sounds crazy. just whole other cycle how consumers will have that technology with them. that's why i think that the next frontier will be. >> i want to pick up on something gene said that android is the biggest threat. it shows worldwide according to idc, android's market 68%. y -- apple's market is 85%. android has grown by 20% and apple's market share only grown
1 or 2%. a much faster growth. >> nokia used to be king of the world and now non-existent. although android is on lots of devices that account for its market share, no single device in the smartphone or tablet space yet to take on apple head on. i have a nexus 7, very good. apple is coming out with a mini, depending how much it costs might be the nexus 7 still board killer. that is what's going on here. they have the single most popular devices and google has the single most popular operating system. >> we forget apple is originally a computer. i'm in the market for a new machine and looking at the macbook and thinking i could get the same thing with a new ipad for $499 and $75 blue tooth keyboard and icloud.
if i can, am i just cannibalizing apple's own business? >> yeah. i think that's what's going on. apple wouldn't say that. it's hard to see it explicitly in the numbers. you look at their computer business, the mac business is 18% of the overall revenue. 10 years ago, 81%. reality is other businesses have grown. to your point, i think cannibalization of the mac is the best thing apple can do. they have 7% of overall publc market but in tablet space they have 90% share. as the tablet space explodes, if they can hang on to it. the net value is good. even though cannibalization sounds bad, at the expense of the ipad a good thing. >> i'm looking at the new macbook with eye retina display, 2200 bucks. at some point guys like me, i'm
not going to do it. >> you can buy microsoft's tablet in the fall. we can't predict paradigms. the smartphone didn't exist and no one imagined it before it happened. the ipad didn't exist. we didn't know the next big thing. it was going do be netbooks and now netbooks are nothing. watch the space. hard to predict, looking for a nice predictable ride for a little while. the next thing nobody knows. >> i will force you to look at your crystal balls. there have been a number of companies hit the $5 billion club. ge, cisco, microsoft, now apple. look at the others all fallen dramatically, right? where do you think, apple is going to go and where do you think its peak is going to be? >> i think over the next few years it will go higher. we have have a $910 target.
these companies have a good reason why they hit their peak and going higher. in apple's case it's different. the end markets they're going after explosive growth, still have many years, getting into the tv and market share and a lot of markets are relatively small. it will turn into a platform play. not a feature battle. this is a platform and ultimately, that will push the stock higher. >> i spoke with steve wosniack a couple weeks ago, still a shareholder, said 1,000 bucks coming. >> another analyst says 1111 is his target right now. >> $11.11? >> no. $1,111. >> just confirming. >> in the short term, there is a lot of upside potential. the thing about apple, we know what they do. they manufacturer things people like. not like facebook which depends on --
>> an inspirational product. >> it can be. in the laptop space, there's a lot of room to grow. they still only have a shall double digit. imagi imagining they're not going to grow in the short to near term would be very very foolish. >> we have three price targets, 1111, $1,000 for gene. we have to wait to see. the research guy who downgraded apple will be on "fast money" tonight at 5:00 p.m. we will put him on the grill and find out why he decided to do that. thank you. >> we kind of knocked microsoft from their peak, right? i understand it. what we like to do in this program is blow people's minds, literally explode them like gallagher does with the watermelon. yes, he's a comedian. it took apple 13 years to top microsoft's milestone in that time, apple's stock gain ed
4300%. not bad. in that 13 years it took microsoft to become the biggest company over from '86 to '89. they gained 38,006%. a better by far investment over a 13 year period. i wanted to throw that out there to the folks in redmond watching out for you. >> absolutely fantastic chart. on deck, the upside to being passive-aggressive in this market. always an upside. >> delays, cancellations and high fees and seats so small even mandy's legs fall asleep. we are your voice to find answers why traveling by airplane sucks. >> we've been asking you to tweet us your nightmares. already the response is awesome. keep them coming at "street signs" cnbc and @mandycnbc. and win fifty thousand dollars. congratulations you are our one millionth customer.
having a tough time keeping up lately? >> the market moves against them very fast and have positions. very hard to get out of positions. easy to invest in an index fund. the s&p 500 is up 13% this year. only 11% of hedge funds are beating that, a terrible number. the average hedge fund has returned 4.6% less than half of what the overall market is doing. why am i bringing this up? if it continues to september and it brings them back, they can't show up to their investors with this kind of performance. you didn't ask me about apple. let me point out something about apple, turning around. as the market dropped, apple dropped, a lot of people blaming apple. a turnaround. i agree with your guests, it has a long way to go, not overpriced. 11 times earnings not overpriced. they have a tiny share of the mobile market in apple and pcs.
i'm a big apple fan. >> i will pin a badge to your shirt. money has been pouring into passively managed funds to the tune of $40 million per date. we have a global strategist and president of asset management. good to have you with us. why do you think people are going the passive route? not wanting to do their homework or more to it? >> a lot of people are. you buy passive, you own it all and not spend time thinking about it. nothing could be further from thetruth. passive investing is a decision. they make choices and bring companies in and out of it. you have to know what you're trying to own before you buy it. >> and the current market, is there one better than the other? >> no. all depends what you're trying to buy. the problem potentially with
passive investing, you tend to get lumped into what's working now. something like apple we're talking about, it is a company very overweighted in your portfolio, companies not so hot at the moment could be the up and comers. >> bob said it, i don't know if you called hear him. only 11% of hedge funds are beating the s&p 500. can you beat this market? >> you can beat the market provided you have enough time. you might not beat it on week to week or quarter to quarter basis. that is the crux of the problem. if a hedge fund is trying to do that in a short time period, they will make big mistake and why we have seen them take big loss. on the other hand, going to mandy's question earlier, i think active management clearly helps. i chaired and asset management process and the strategy selection is similar to something passive.
then you have to pick good managers to pick good stocks and they have to do the jobs on equities and what they pick are bonds. each one has a level of value added to the total. i would come out squarely on the behalf of active management. >> and when will we see active funds being loved again? >> i think active will be loved when it's risk on and -- >> we're at four year highs. it feels like low volume, low volatility. feels like people aren't throwing money at the market but we're gradually creeping higher. >> you are right, we are at four year highs but very little retail trading volume. what you need is for the retail investor to feel confident enough to go back. that is going to come. i've called 2013 as the period of golden age for equity investment. >> you have to remember when people look for active management, they're looking for things other than performance. they're looking for volatility dampening.
some of the benefits of active management is maybe not bouncing around so much. you take the market at any one date, you might have market over passive. but for retirees, stock selection could be helpful and help them sleep at night and keep them in the game. >> i'm tired of the volume conversation. my parents don't care there's low volume. they care their 4401k is at a four year high. >> but if they see it onbounce around so much- >> i tell them don't open it! >> and they will have pain over it. the volatility, over time, active management wins out. >> they do have to care about volatility because over time, it can completely reverse itself and why older people need to
care about it than younger people. you need to have asset allocation to have a proper diversification of assets. that, you won't get from the passive side if you buy them and hold them and not worried about risk adverse. >> diversification, diversification. in terms of macro strategy, i see you're calling or concerned about a u.s. recession despite you have these four years highs. >> that is correct. partly what we discussed so far, trading volume is low. a nervous rally i would categorize it. >> a central bank -- >> a drug is keeping the equity market going. september and october will be the months in my concern whether reversal would happen. >> why? >> why? people are back from vacation on both sides of the atlantic. some disappointment from chairman bernanke august 31st what he says.
and they don't provide all the unlimited purchases of bonds they're hoping for. a series of things could go wrong, closer to the elections. >> all the european politicias s are at the beach now. should hthey stay on vacation? >> just the women. >> markets are hanging- >> be nice. >> markets are hanging on politicians words more than i've seen in my entire 32 career of the politicians. we're kind of waiting -- because corporate american companies are tending to do wet better, balance sheets look better but the story is so muddied up because of the political landscape. >> it's a risky situation. thank you. >> good to be here. coming up next, stilettos and speakers making the disaster and sunshine stock list today. >> and facebook versus twitter in the mobile ad wars. we will take a look who is winning and what is at stake for social media stock. stay with us.
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million share. now facebook lost most of its value from a debut of 38 bucks. and how to monetize mobile and while they try to figure that out, twitter looks like it may have a leg up. joining us from los angeles to compare the mobile ads of these two mobile power houses. hi, julia. >> hi to you, mandy. facebook ads have the value of scale. about half of people manage them on their devices. twitter has 44 million regular mobile uses. they have more clicks on mobile for twitter than desktop according to a firm that works with facebook. the social network is just starting to ramp up those ads. it's too soon to say how many they can serve to users without annoying them.
twitter was born a mobile service and been serving mobile ads since last year. they generate about half the company's revenue and they float seamlessly into the twitter feed. twitter says its engagement rates are as high as 3% in contrast, it is .1%. the question is who has the advantage. research firms says the twitter ads are generally considered more effective and twitter has a head start. facebook has such massive scale, it could pose a big challenge once it rolls out the mobile ads in ernest. >> thank you. live from los angeles. who else but best buy on the disaster menu today. it's a tough story. stock trading lows not seen since january of 2003. earnings well short of estimates, revenue short of estimates, the eighth same sales store decline in the past four
quarters, unchanged. the drop in sales was not as big as the drop last quarter. that's literally the only positive you could find. >> you have to find the positives where they are n. in the meantime, stilettos and sneakers. love that store. trading at all time highs back to its ipo in 2005. coming up next, home builders have been on a tear. could there be trouble for the companies that make all the stuff you put in your house? cabinets, floors, dungeon doors. >> you have those things? >> we will have an analyst to talk about that. >> and there's still time to tweet your worst airline story and your best, we're open to both sides, tweet us. streets signs will be back in just a moment's time.
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jump jumped 8% for the quarter compared to the prior period. and the liquidation of the border borders things, not as good as "50 shades of grey" doing well helping barnes & noble although that stock is down 2% today. >> it had a huge quarter and the stock is jumping over 18%. >> that is a good day for urban outfitters, epa 9 cents. the target was raised from 37 to 32, thinking the recovery taking place a quarter before expectations. oppenheimer has a $38 target. jenny has a raised price target for urban outfitters at 40 bucks. >> moving from retail to sports where manchester's latest fan is none other than george soros. >> now, there's contention about this. doug watching right now sent a note to a few of us, maybe
soros' stake released in a filing at 7.85%, a lot of filings saying george soros is positive on man chechester beca he took the stake, perhaps soros didn't buy the stake, he was allotted the stake at the ipo and maybe he got more than he planned. you can say if he asked for the allotment he would be bullish. either way, george soros owns more than 8% offerm manchester united. they have a heap iing amount of debt and man city win ing tning title last year. they just won the title and the new season just started. >> not sure. let's move along and talk donuts. always a good time to talk donuts. today, we're talking krispy
kreme. >> not a huge move up. holt group, india, they want to open 80 stores in five years. a huge potential if your power stays on and you can bake the donuts. >> massive demographic tailwinds. big young population and they love fried food. wh what's krispy kreme? hydronuts with cream and sprinkles. who doesn't love that? we will talk about the rising tide in housing. it's leaving products high and dry. we talk to steve kim, managing director in barclay's, why this disconnect? >> reality is own though home prices are going up across the country, i think the man on the street doesn't know that. two years after the housing
prices went down, people realized they were going down. on the way up, it will probably be quicker but probably not as quick as four months. what we're seeing even though you're seeing home prices going up, we don't think that has filtered into the general understanding and people are reluctant to make investments in their home. >> there are a number of stocks. stanley, black & decker, mohawk, corning, run us through your recommendations on these stocks on the basis of what you said. >> sure. the first thing you should be thinking about looking for a derivative play for housing, not home builders but companies that supply into the building proc s process, think about what kind of renovation demand they feed into. take corning, changing your roof is a discretionary model and don't do it until you have to.
as a result, that demand tends to be steady. by contrast those that sell wood flooring, armstrong the largest producer of wood flooring, it's somewhat discretionary, relatively high ticket. you don't necessarily have to do it this year. result, things that go into kitchen and bathroom models, things like flooring, those are areas you want to be a little bit more cautious, particularly pre-election. >> you cut your rating on armstrong and stanley from overweight to equal rate. does that mean if our viewers own it, they should sell it? >> you're likely to see them not participate as well as in the housing rally we're seeing ongoing. this is all in the context of a bullish outlook for the next year to two years. we're seeing people wanting to play these names but maybe not so much these names right now. >> a pleasure. thanks. >> and a 3 1/2 month high today for gold.
interesting because it's been sideways. why have we moved up in gold? >> we moved up in gold because of the optimism a lot of traders are seeing in the euro zone and perhaps stimulus measures out of china. not only gold moved up. i went on vacation, everything was sideways for the last week or so and now we've seen a real bounce, oil prices bouncing above the 200 day moving average. this is the october contract now trading electronically. september expired today. in terms of the gold price, lot of traders were looking for the $1640 level and gold closed above that mark today, above $20. it's above the 100 day moving average and then the 200 day moving average, we'll see resistance there and psychologically getting to $1650 will be the key. coming up, the ipod generation has a really big problem. they can't hear. we have the ceo of a start-up
turning that problem into big profits. this is just unreal, goes with the song. nike with a big shoe and new price. all the kids with pumped up kicks welcome be spending some benjamins. and then, in one blinding blink of an eye, their tree had given its last. but with their raymond james financial advisor, they had prepared for even the unthinkable. and they danced. see what a raymond james advisor can do for you.
i'm bill griffin. coming up at the top of the hour, should soaring corn prices suspend the ethanol mandate? you think the price at that upscale steakhouse for your porterhouse is already expensive? get ready for more sticker shock when it comes to those prime cuts of beef. billions in tax refunds could be delayed next year if congress doesn't fix the cliff problem soon. will that deal yet another crushing blow to the economy? we look forward to seeing you here at the top of the hour from any new york stock exchange. this headline caught our attention and it should catch yours. to ma nike plans to roll out its most expensive sneaker yet, an lebron
basketball retail 315 bucks. a lot of money. jane wells is here to put the price tag into privilege. jane. >> brian, you could buy this for that amount of money or fly round trip from beautiful burbank to los angeles labor day and still have 100 bucks to lose at craps. i could only come up with 50. folks on twitter gave me more suggestions. at $315, the new nike is a really big shoe. how big? for that money, you could buy apple or half a share. you could buy facebook, 16 shares. quote, 20, if you wait until next week, tweeted rich walls. that money could buy five or six doses of sedatives for shareholde shareholders. hotter than lebron right now is corn. warren rogers tweeted you could buy 37 bushels at 3315 bucks, quote if you hurry. you could buy a kindle fire and
trilogy and writing crop. or buy a shoe. not through nikes, but 3$315 wil buy you a lot of animal cheeseburgers and only one jimmy ch ew o red pump proving women's shoes are even more outrageous. >> that's the crime. if nike's is 45%, imagine jimmy choos. you could get 11 pounds of bake con and the others suggested you buy cheaper shoes and give the rest to charity. and in from urban international asking parents not to buy the shoes, don't buy it. it represents twisted priorities and confused values. >> for $315, could you or mandy
dunk? >> yes, if i can scoot in high heels, i can dunk in high heels. my demintive height is a bit of a headwind. >> you could spend a million dollar on a shoe, i'll get nowhere near the basket. i'm the worst horse player in the history of -- >> you and mandy in heels are still shorter than i am. >> well -- >> that's a nice thing, okay. it's fine to be short. >> fine. good things come in small packages. >> but thinking of you on her shoulder is an awkward image. >> moving on. maybe facing a problem in recent years, excessive music player use is likely to lead to an uptick in hearing demand in the next two decades. no surprise, the start-ups are
tapping into this demand by turning grandma's hearing aid into a hispanic accessory. ceo and founder of the web base start- start-up, a really good story and fascinating. it's a huge stigma for elderly people, like my parents who don't want to get a hearing aid despite they're going completely deaf and a lot of stigma to getting a hearing aid. if you treat this accessory very small or very fashionable, this is a great idea. >> absolutely. the issue with hearing aids in the past is a perception of either being very clunky or big tubes, in a way making you old or deficient. so in a way with this massively growing market we have seen from both the younger generations and older population segments and baby boomers and life expectancies, we are positioning hearing aids more in realm of accessory opposed to old school medical device.
>> i know our viewers -- i know you can't see it but you can see a quarter. you can get an idea how small it is. if you can't see it, that's kind of the point. what does this cost. >> traditionally if you go to an audiologist clinic, they can cost 2,000 to $3,000. through our model, you can get one of these cool great looking devices from $399 to $599. >> how is it powered? >> it's battery powered. comes with four program settings so you can adjust it to whichevwhenever the environment you find yourself in. what's very interesting, they're very small and slick and sit inside the ear canal and almost visible. >> we talk about the walkman generation or ipod generation having their eardrums abused in a way nobody ever used to, how many people would there be in the target audience? what's the demand like? >> right now, the addressable market with people with
headlines in the u.s. is 25 to out for million people for hearing loss. a big chunk of the population. what's striking about this figure is only 25% of these actually own a hearing aid. in our view, only two factors drive this, the stigma, traditional old school devices and, secondly, it's the price, kept a lot of people from accessing these products because there's very little health care coverage for these products. >> absolutely. thank you for sharing your story with us. >> thank you. >> i dropped it and had a hard time picking it back up, it's so small. i don't want to buy it. >> find out the fascinating story about another company turning problems into profits for companies like target, amazon, staples, bed bath and beyond. right now or after the show at
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are you ready? you better get ready for a new round of airfare hikes. just this hour, american airlines filed for another roun. this matches southwest's increases to off set higher fuel costs. many carriers are adding more seats and reducing leg room. this is the latest signs of paying more for less to fly. after 9/11, airlines started to charge more for feed and for checked bags. the average cost of a ticket in 1995 was $298, and now it's $247, but last year the airlines made $22.6 billion, and today's ticket prices do not include all of the extra fees that back in
1995 were part of the overall tiekt price. certainly a lot of us have add airline difficults recently. >> we all herd about them when you came back to the office. >> it was a 23 hour trip to northern michigan. we wanted to hear your nightmares. >> landed windy, and the pilot sate hold on while i catch my brents. and steve says a five hour delay, could not find the pilot, found the pilot, could not find the stewardess, found her at the bar. the point is delays and
nightmares and whatever. joining us is kate hanai. hi. she's one of the co-writers for the passenger bill of rights, and on the found is bob crandall. not to personalize it, but i sat on a plane for two hours 50 minutes, back to the gate. sat in the plane for another 2 hours and 50 points, back to the date. has it gotten any better? >> absolutely, we cut the tarmac strandings down to a statistical zero. you experienced a loophole that we did not anticipate which is that gate time is not considered tarmac time. so when they return to the gate they can start over again.
>> hi kate. i thought she was right when she objected to stranding people on the tarmac. if the airplane goes back to the gate, you go back to the principal thing that kate was complaining about is that people have a chance to get off. they don't want to get off if it's weather is bad or the tarmac is crowded, and now they have an opportunity. the complaint before was they don't have a opportunity, they're traps. >> my point is we're using world war two generation radar. -- planes can fly in bad weather, it's the radar that's the problem. you have tsa with pat downs, no leg room, fees, bob, flying used to be fantastic. even when i was a kid, and i'm not that old. what happened? >> i'll tell you what, what happened is a whole series of
things with respect to obsolete verses new radar, you can forget blaming the airlines, it's congress and the faa. they refuse to give them the funds. if you want to know what accounts for the fact that flying is getting less and less and less fun. look in the mirror because what the public has said loud and clear, we are going to take the cheapest flight. end of discussion. >> that's sort of true. you know, we represent a lot of small business owner at fliers rights, and in the case of those folks, where they have to pay for their own tickets, they don't work for a corporation and they have to arrive on time -- in the case of those folks, they're having to put an extra day in between in order to ensure that they make it on
time, or people headed to a cruise where they have a time certain they have to be there, in those cases we're hearing that people are willing to pay more and hearing a huge complaint about the ancillary fees -- >> let's take them one at a time. the first, i think kate knows that the on-time record of the scheduled airlines, in 2012, has been substantially better than in 2011. >> yes. >> and substantially better than in 2012. one of o the consequences of having fewer seats on the system, it's harder to get a seat, and the seat cost more, but it is much more likely that you're going to arrive on time. so the actual on time performance of the airlines is pretty good. if, in fact, you have a tremendously crucial thing and you have got to be there at 8:00 tomorrow morning, you should go the night before, no question.
because the fact is that no matter how bell the airlines run their business, if, for example, you want to go out of there -- >> bob, i think something is missing. airlines are reducing their passengers contract of carriage. when there's a flight delair or cancellation, they can't rely on the airline to take care of them like they used to. >> kate, bob, thank you, we have to go. get ready, you're about to feel really, really old. you do what. because it matters.
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